Principles of Managerial Finance, Student Value Edition Plus MyLab Finance with Pearson eText - Access Card Package (15th Edition) (Pearson Series in Finance)
15th Edition
ISBN: 9780134830209
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
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Chapter 4, Problem 4.2STP
a)
Summary Introduction
To calculate: Cash budget.
Introduction:
Cash budget can be defined as a money spending plan which estimates the money inflows and outflows for a business over a particular timeframe. It is used to assess whether the firm has adequate money to work.
b)
Summary Introduction
To calculate: Required total financing.
c)
Summary Introduction
To calculate: Size of the following particulars for preparation of pro forma balance sheet.
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(Learning Objective 5: Use the COGS model to make management decisions)Spicer Industries prepares budgets to help manage the company. Spicer is budgeting forthe fiscal year ended January 31, 2018. During the preceding year ended January 31, 2017,sales totaled $9,700 million and cost of goods sold was $6,400 million. At January 31, 2017,inventory was $1,500 million. During the upcoming 2018 year, suppose Spicer expects costof goods sold to increase by 12%. The company budgets next year’s ending inventory at$1,800 million.Requirement1. One of the most important decisions a manager makes is how much inventory to buy. Howmuch inventory should Spicer purchase during the upcoming year to reach its budget?
Student question Â
Garden Sales, Incorporated, sells garden supplies. Management is planning its cash needs for the second quarter. The company usually has to borrow money during this quarter to support peak sales of lawn care equipment, which occur during May. The following information has been assembled to assist in preparing a cash budget for the quarter:
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Budgeted monthly absorption costing income statements for April–July are:
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April
May
June
July
Sales
$ 730,000
$ 910,000
$ 610,000
$ 520,000
Cost of goods sold
511,000
637,000
427,000
364,000
Gross margin
219,000
273,000
183,000
156,000
Selling and administrative expenses:
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Â
Â
Selling expense
91,000
110,000
72,000
52,000
Administrative expense*
50,500
68,800
44,600
49,000
Total selling and administrative expenses
141,500
178,800
116,600
101,000
Net operating income
$ 77,500
$ 94,200
$ 66,400
$ 55,000
*Includes $33,000 of depreciation each month.
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Sales are 20% for cash and 80% on account.
Sales…
Pelican Merchandising & More is a family-owned store. The business is now approaching the end of the year and is in the process of identifying its cash needs for the first quarter of the new year. You are the management accountant of the entity and have been tasked to prepare the cash budget for the business for the quarter ending March 31, 2022.(i) Extracts from the sales and purchases budgets are as follows:
Month2021 - 2022
CashSales
SalesOnAccountÂ
CashPurchases
PurchasesOnAccountÂ
November 2021
$138,100Â
$480,000
Â
$345,000
December 2021
$156,500Â
$600,000
$25,800Â
 $380,000Â
January 2022
$170,975
$650,000
$44,625
$400,000Â
February 2022
$135,740Â
$700,000
$30,400Â
$480,000
March 2022
$226,420Â
$800,000
$55,100
 $540,000Â
(ii) An analysis of the records shows that trade receivables (accounts receivable) are settledaccording to the following credit pattern, in accordance with the credit terms 4/30, n90:55% in the month of sale35% in the first month following the…
Chapter 4 Solutions
Principles of Managerial Finance, Student Value Edition Plus MyLab Finance with Pearson eText - Access Card Package (15th Edition) (Pearson Series in Finance)
Ch. 4.1 - Prob. 4.1RQCh. 4.1 - Prob. 4.2RQCh. 4.2 - Briefly describe the first four modified...Ch. 4.2 - Describe the overall cash flow through the firm in...Ch. 4.2 - Prob. 4.5RQCh. 4.2 - 4-B Why is depreciation (as well as amortization...Ch. 4.2 - Prob. 4.7RQCh. 4.2 - Prob. 4.8RQCh. 4.2 - Prob. 4.9RQCh. 4.3 - Prob. 4.10RQ
Ch. 4.3 - Prob. 4.11RQCh. 4.3 - Prob. 4.12RQCh. 4.3 - What is the cause of uncertainty in the cash...Ch. 4.4 - Prob. 4.14RQCh. 4.5 - Prob. 4.15RQCh. 4.5 - Prob. 4.16RQCh. 4.6 - Prob. 4.17RQCh. 4.6 - What is the significance of the plug figure,...Ch. 4.7 - Prob. 4.19RQCh. 4.7 - Prob. 4.20RQCh. 4 - Opener-in-Review The chapter opener described a...Ch. 4 - Learning Goals 2, 3 ST4-1 Depreciation and cash...Ch. 4 - Prob. 4.2STPCh. 4 - Prob. 4.3STPCh. 4 - Prob. 4.1WUECh. 4 - Prob. 4.2WUECh. 4 - Learning Goal 3 E4-3 Determine the operating cash...Ch. 4 - Prob. 4.4WUECh. 4 - Learning Goal 5 E4-5 Rimier Corp. forecasts sales...Ch. 4 - Prob. 4.1PCh. 4 - Learning Goal 2 P4-2 Depreciation In early 2019,...Ch. 4 - Prob. 4.3PCh. 4 - Learning Goals 2, 3 P4-4 Depreciation and...Ch. 4 - Learning Goal 3 P4-5 Classifying inflows and...Ch. 4 - Prob. 4.6PCh. 4 - Learning Goal 4 P4-8 Cash receipts A firm has...Ch. 4 - Learning Goal 4 P4-9 Cash disbursements schedule...Ch. 4 - Learning Goal 4 P4-10 Cash budget: Basic Grenoble...Ch. 4 - Prob. 4.11PCh. 4 - Learning Goal 4 P4-12 Cash budget: Advanced The...Ch. 4 - Prob. 4.13PCh. 4 - Prob. 4.14PCh. 4 - Learning Goal 4 P4-15 Multiple cash budgets:...Ch. 4 - Learning Goal 5 P4-16 Pro forma income statement...Ch. 4 - Learning Goal 5 P4-17 Pro forma income statement:...Ch. 4 - Learning Goal 5 P4-18 Pro forma balance sheet:...Ch. 4 - Learning Goal 5 P4-19 Pro forma balance sheet...Ch. 4 - Learning Goal 5 P4-20 Integrative: Pro forma...Ch. 4 - Learning Goal 5 P4-21 Integrative: Pro forma...Ch. 4 - Prob. 4.22PCh. 4 - Prob. 1SE
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- Pelican Merchandising & More is a family-owned store. The business is now approaching the end of the year and is in the process of identifying its cash needs for the first quarter of the new year. You are the management accountant of the entity and have been tasked to prepare the cash budget for the business for the quarter ending March 31, 2022.(i) Extracts from the sales and purchases budgets are as follows: Month2021 - 2022 CashSales SalesOnAccount CashPurchases PurchasesOnAccount November 2021 $138,100 $480,000  $345,000 December 2021 $156,500 $600,000 $25,800  $380,000 January 2022 $170,975 $650,000 $44,625 $400,000 February 2022 $135,740 $700,000 $30,400 $480,000 March 2022 $226,420 $800,000 $55,100  $540,000 (ii) An analysis of the records shows that trade receivables (accounts receivable) are settledaccording to the following credit pattern, in accordance with the credit terms 4/30, n90:55% in the month of sale35% in the first month following the…arrow_forwardThe management accountant at Miller Merchandising & More, Odail Russell is in the process ofpreparing the cash budget for the business for the fourth quarter of 2021. It is customary for thebusiness to borrow money during this quarter. Extracts from the sales and purchases budgets areas follows:Month cash sales sales on account purchasesAugust $85,000 $640,000 $420,000September $70,000 $550,000 $550,000October $ 88,550 $ 600,000 $500,000November $77,160 $800,000 $600,000December $174,870 $500,000 $450,000 i) An analysis of the records shows that trade receivables are settled according to the following credit pattern, in accordance with the credit terms 4/30, n90:50% in the month of sale30% in the first month following the sale20% in the second month following the sale Required The business needs to have a sense of its future cashflows and therefore requires the preparation of the following: 1. A schedule of budgeted cash collections for trade receivables (sales on account) for…arrow_forwardThe management accountant at Miller Merchandising & More, Odail Russell is in the process ofpreparing the cash budget for the business for the fourth quarter of 2021. It is customary for thebusiness to borrow money during this quarter. Extracts from the sales and purchases budgets areas follows:Month        cash sales      sales on account   purchasesAugust        $85,000           $640,000       $420,000September    $70,000           $550,000       $550,000October       $ 88,550          $600,000       $500,000November     $77,160           $800,000       $600,000December    $174,870          $500,000        $450,000 Expected purchases include monthly cash purchases of 5%. All other purchases are on account. Accounts payable are settled as follows, in accordance with the credit terms –2/30, n60: Expected purchases include monthly cash purchases of 5%. All…arrow_forward
- The management accountant at Miller Merchandising & More, Odail Russell is in the process ofpreparing the cash budget for the business for the fourth quarter of 2021. It is customary for thebusiness to borrow money during this quarter. Extracts from the sales and purchases budgets areas follows:Month        cash sales    sales on account    purchasesAugust         $85,000       $640,000         $420,000September     $70,000       $550,000         $550,000October       $88,550        $600,000         $500,000November    $77,160         $800,000        $600,000December    $174,870       $500,000         $450,000 i) An analysis of the records shows that trade receivables are settled according to the following credit pattern, in accordance with the credit terms 4/30, n90:50% in the month of sale30% in the first month following the sale20% in the second month following…arrow_forwardThe management accountant at Miller Merchandising & More, Odail Russell is in the process ofpreparing the cash budget for the business for the fourth quarter of 2021. It is customary for thebusiness to borrow money during this quarter. Extracts from the sales and purchases budgets areas follows:Month        cash sales      sales on account   purchasesAugust        $85,000           $640,000       $420,000September    $70,000           $550,000       $550,000October       $ 88,550          $600,000       $500,000November     $77,160           $800,000       $600,000December    $174,870          $500,000        $450,000 Expected purchases include monthly cash purchases of 5%. All other purchases are on account. Accounts payable are settled as follows, in accordance with the credit terms –2/30, n60: 60% in the month in which the inventory is purchased40% in the…arrow_forwardThe management accountant at Miller Merchandising & More, Odail Russell is in the process ofpreparing the cash budget for the business for the fourth quarter of 2021. It is customary for thebusiness to borrow money during this quarter. Extracts from the sales and purchases budgets areas follows:Month    cash sales    sales on account    purchasesAugust     $85,000       $640,000         $420,000September  $70,000       $550,000        $550,000October     $88,550       $600,000        $500,000November   $77,160       $800,000        $600,000December   $174,870      $500,000        $450,000 i) An analysis of the records shows that trade receivables are settled according to the following credit pattern, in accordance with the credit terms 4/30, n90:50% in the month of sale30% in the first month following the sale20% in the second month following the saleii) Expected purchases include…arrow_forward
- The management accountant at Miller Merchandising & More, Odail Russell is in the process ofpreparing the cash budget for the business for the fourth quarter of 2021. It is customary for thebusiness to borrow money during this quarter. Extracts from the sales and purchases budgets areas follows:Month      cash sales     sales on account      purchasesAugust      $85,000          $640,000          $420,000September   $70,000          $550,000          $550,000October      $88,550           $ 600,000        $500,000November    $77,160           $800,000        $600,000December    $174,870          $500,000        $450,000 i) An analysis of the records shows that trade receivables are settled according to the following credit pattern, in accordance with the credit terms 4/30, n90:50% in the month of sale30% in the first month following the sale20% in the…arrow_forwardPelican Merchandising & More is a family-owned store. The business is now approaching theend of the year and is in the process of identifying its cash needs for the first quarter of the newyear. You are the management accountant of the entity and have been tasked to prepare the cashbudget for the business for the quarter ending March 31, 2022.(i) Extracts from the sales and purchases budgets are as follows:Month2021 - 2022CashSalesSalesOnAccountCashPurchasesPurchasesOnAccountNovember 2021 $138,100 $480,000 $345,000December 2021 $156,500 $600,000 $25,800 $380,000January 2022 $170,975 $650,000 $44,625 $400,000February 2022 $135,740 $700,000 $30,400 $480,000March 2022 $226,420 $800,000 $55,100 $540,000(ii) An analysis of the records shows that trade receivables (accounts receivable) are settledaccording to the following credit pattern, in accordance with the credit terms 4/30, n90:55% in the month of sale35% in the first month following the sale8% in the second month following the…arrow_forwardPelican Merchandising & More is a family-owned store. The business is now approaching theend of the year and is in the process of identifying its cash needs for the first quarter of the newyear. You are the management accountant of the entity and have been tasked to prepare the cashbudget for the business for the quarter ending March 31, 2022.(i) Extracts from the sales and purchases budgets are as follows:Month2021 - 2022CashSalesSalesOnAccountCashPurchasesPurchasesOnAccountNovember 2021 $138,100 $480,000 $345,000December 2021 $156,500 $600,000 $25,800 $380,000January 2022 $170,975 $650,000 $44,625 $400,000February 2022 $135,740 $700,000 $30,400 $480,000March 2022 $226,420 $800,000 $55,100 $540,000(ii) An analysis of the records shows that trade receivables (accounts receivable) are settledaccording to the following credit pattern, in accordance with the credit terms 4/30, n90:55% in the month of sale35% in the first month following the sale8% in the second month following the…arrow_forward
- Pelican Merchandising & More is a family-owned store. The business is now approaching theend of the year and is in the process of identifying its cash needs for the first quarter of the newyear. You are the management accountant of the entity and have been tasked to prepare the cashbudget for the business for the quarter ending March 31, 2022.(i) Extracts from the sales and purchases budgets are as follows:Month2021 - 2022CashSalesSalesOnAccountCashPurchasesPurchasesOnAccountNovember 2021 $138,100 $480,000 $345,000December 2021 $156,500 $600,000 $25,800 $380,000January 2022 $170,975 $650,000 $44,625 $400,000February 2022 $135,740 $700,000 $30,400 $480,000March 2022 $226,420 $800,000 $55,100 $540,000arrow_forwardPelican Merchandising & More is a family-owned store. The business is now approaching theend of the year and is in the process of identifying its cash needs for the first quarter of the newyear. You are the management accountant of the entity and have been tasked to prepare the cashbudget for the business for the quarter ending March 31, 2022.(i) Extracts from the sales and purchases budgets are as follows:Month2021 - 2022CashSalesSalesOnAccountCashPurchasesPurchasesOnAccountNovember 2021 $138,100 $480,000 $345,000December 2021 $156,500 $600,000 $25,800 $380,000January 2022 $170,975 $650,000 $44,625 $400,000February 2022 $135,740 $700,000 $30,400 $480,000March 2022 $226,420 $800,000 $55,100 $540,000  Upon receipt of the budget, the team manager, June Jackson, has now informed you that, in keeping with industry players, the management of Pelican Merchandising have indicated an industry requirement to maintain a minimum cash balance of $185,000 each month. She has also noted that…arrow_forwardThe management accountant at Miller Merchandising & More, Odail Russell is in the process of preparing the cash budget for the business for the fourth quarter of 2021. It is customary for the business to borrow money during this quarter. Extracts from the sales and purchases budgets areas follows: Month      Cash sales    Sales on account    PurchasesAugust     $85,000       $640,000         $420,000September  $70,000       $550,000        $550,000October     $88,550       $600,000        $500,000November   $77,160       $800,000        $600,000December   $174,870      $500,000        $450,000 i) An analysis of the records shows that trade receivables are settled according to the following credit pattern, in accordance with the credit terms 4/30, n90:50% in the month of sale30% in the first month following the sale20% in the second month following the sale ii) Expected purchases…arrow_forward
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